Running a pharmacy is tough work as it is. Dealing with issues around your pharmacy merchant account can feel like another job altogether.
Payment processing shouldn’t be this hard, though it is in the pharmacy industry.
Challenges like astronomical chargebacks, the pain of compliance and general processing issues are the enemies of your pharmacy’s bottom line. But most of these issues can be avoided with the right help.
Here’s the plan:
I’m going to show you the most common problems pharmacy owners are facing around their merchant accounts and how to fix them.
We’ll cover everything from the headache of compliance to high processing fees, chargebacks, abandonment, fraud and more.
Ready to see which issues are crushing your pharmacy profits? Let’s dive in.
Contents
- Why Do Pharmacy Merchant Accounts Have Extra Challenges?
- Why Chargebacks Are Such A Problem For Pharmacies
- Strategies To Reduce Chargebacks
- Compliance Issues You Need To Know About
- Issues With High Processing Fees
- Shopping Carts Are Being Abandoned
- Having Trouble Integrating Your PMS?
- Security And Fraud Concerns
- Final Thoughts
Why Do Pharmacy Merchant Accounts Have Extra Challenges?
Payment processors and banks consider pharmacy merchant accounts high-risk for a variety of reasons.
The pharmacy industry is unique because it deals with regulated products, high-value transactions and a large volume of card-not-present sales. After all, when you’re processing payments for healthcare products and medications, it’s more at stake than with many other retail industries.
The Best Pharmacy Merchant Account Providers understand these challenges and work with pharmacies to provide solutions that can address these issues. You can make informed decisions when selecting a payment processor who is experienced and familiar with the needs of pharmacies.
Pharmacy merchant accounts require certain specific features like HIPAA-compliance, FSA/HSA card acceptance and more robust chargeback protection measures.
Why Chargebacks Are Such A Problem For Pharmacies
Believe it or not… chargebacks are one of the biggest threats to pharmacy businesses.
Industry data shows chargebacks are projected to cost eCommerce merchants a whopping $33.79 billion in 2025. And pharmacies are at particular risk due to the nature of their transactions.
Customers place orders for medications online, insurance claims get disputed and billing errors occur. All of these things can result in chargebacks that cut into pharmacy profits.
Add to that the recent data which shows 72% of merchants experienced an increase in friendly fraud chargebacks in 2024 and the outlook gets even worse. Meaning, customers are disputing legitimate charges at an all-time high.
The average chargeback rate for card-not-present transactions ranges between 0.6% and 1%. Sure, that doesn’t seem like much at first glance but when you are processing thousands of transactions per month those numbers can add up in a hurry.
Strategies To Reduce Chargebacks
Chargebacks are a serious problem that must be addressed with a strong prevention strategy. Here are a few ways to lower your chargeback rate:
- Providing clear product descriptions and shipping policies
- Detailed transaction receipts that include merchant name
- Prompt customer service response times
- Automated fraud detection tools
- Proper documentation for all transactions
Above all, merchants must respond to all chargebacks. Businesses that fight back win around 45% of their disputes. That’s a winning percentage you can bet on.
Compliance Issues You Need To Know About
HIPAA compliance is not optional when you’re running a pharmacy.
Every single payment you accept must meet rigorous healthcare regulations. That means your merchant account provider must offer HIPAA-compliant payment processing solutions that safeguard patient data.
The payment gateway must encrypt all sensitive information during the data transmission process. You must have the right data storage procedures that are compliant with healthcare standards and robust audit trails that track every transaction.
HIPAA is just the tip of the compliance iceberg.
You will also have PCI DSS compliance which sets the rules on how you must handle and store credit card information. Add in state-specific pharmacy regulations and you’ve got the makings of a compliance nightmare.
The solution? You need a payment processor who has experience with pharmacy merchant accounts and knows these requirements inside and out.
Issues With High Processing Fees
I know this is no surprise to you but let’s state the obvious…
High-risk merchant accounts are charged higher fees.
Banks and payment processors charge more because they see additional risk when working with pharmacies. The industry as a whole is risky and that extends to your business.
You will face higher monthly fees, increased transaction rates, larger reserve requirements and additional compliance costs. Plus some processors will charge hidden fees for chargeback handling, PCI compliance and monthly minimums.
The best way to manage these fees is to shop around and negotiate.
Do not accept the first quote you are given. Get rates from multiple providers and haggle down on fees you don’t need. If you’re like most merchants, you can drive a hard bargain.
Shopping Carts Are Being Abandoned
Globally, 70% of online shopping carts are abandoned.
That number is even higher for online pharmacies if your checkout process isn’t optimized. Customers want to get in and out of your store quickly. The fewer hoops they must jump through to complete the checkout process the better.
The #1 cause of cart abandonment is a complicated checkout process.
Customers do not want to register for an account, fill out endless forms or have to navigate multiple pages before checkout. If it’s too hard or time-consuming, they will walk.
A lack of payment options is another big problem. If you don’t accept a customer’s preferred payment method, they will shop elsewhere.
The key is to offer as many payment options as possible to include credit cards, debit cards, digital wallets and HSA/FSA cards. Make your checkout process seamless with a guest checkout option.
Having Trouble Integrating Your PMS?
Ideally, your merchant account will integrate with your pharmacy management software.
But here’s the rub, not all payment processors play well with pharmacy management software. In fact, you may end up with a clunky workaround that can slow down your business and cause errors.
The best pharmacy merchant account providers will offer integration with popular pharmacy management software systems. Automatic payment reconciliation, real-time inventory updates, seamless insurance processing and unified reporting across all channels.
Integration between your payment processing and pharmacy management systems means less time spent on admin work and fewer mistakes.
Security And Fraud Concerns
Payment fraud is a huge problem in the online pharmacy world.
Card-not-present transactions are especially vulnerable because you can’t physically verify a customer’s identity. Fraudsters know this and actively target online pharmacies.
Merchants need to implement multiple security layers to protect their business:
- Use 3-D Secure authentication for online purchases. This adds an additional verification step that will significantly reduce fraud.
- Implement address verification to ensure billing addresses match what is on the card.
- Monitor all transactions for suspicious activity such as large orders, multiple failed payments or shipping to high-risk locations.
- Set up automated fraud detection rules that flag suspicious transactions for manual review.
The cost of fraud is more than just lost merchandise. Chargeback fees, increased processing costs and potential account termination if your fraud rates get too high. It’s a financial and reputational nightmare.
Final Thoughts
Pharmacy merchant accounts are high-risk accounts with a variety of extra challenges.
From keeping chargebacks under control to keeping compliant to general payment processing issues, you need to know how to address these pain points or they can seriously harm your business. The key is working with a payment processor who understands your business and your industry and offers tools to help you overcome the extra hurdles.
Start by putting a plan in place to reduce chargebacks through better fraud protection and customer service practices. You can use automated tools and merchant-best practices to achieve this goal. Work to ensure your pharmacy is fully compliant with healthcare regulations and consider hiring compliance experts to do this work for you. Lastly, optimize your online checkout process to make it as simple as possible to reduce abandonment.
With the right approach and the right merchant account provider, you can solve these problems and build a profitable pharmacy business.
